Sales Are Like Drugs. What Happens When A Store Wants Customers To Quit?

Last year, J.C. Penney saw what every big retailer had been seeing for years: the threat of Amazon and other new competitors rising to destroy their business.

So J.C. Penney brought in a bold new CEO. Ron Johnson had already created Apple Store, a chain of physical stores where people flocked to shop. Before that, he had revamped Target.

And Johnson had a plan for J.C. Penney: Tell customers they don't have to spend time anymore clipping coupons or waiting for sales to happen. Instead, the store would offer fair prices on its merchandise every day.

"He sort of said sales were akin to drugs, and he was trying to wean customers off drugs," says retail analyst Rafi Mohammed.

It didn't work. The old customers really did love clipping coupons and waiting for sales.

The company redesigned its stores to try to make J.C. Penney a destination for a younger, hipper crowd. There are boutiques within the store featuring individual designers. But the new crowd hasn't shown up yet.

This week, J.C. Penney announced that its sales in the last three months of the year were down about 30 percent from the previous year.

Now, the company is backing off its bold strategy a bit, and reintroducing sales and some coupons for shoppers in its loyalty program. But they won't be called coupons. They'll be called "gifts."

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Transcript

RENEE MONTAGNE, HOST:

J.C. Penney is having a hard time. The retailer just announced its sales numbers for this past holiday shopping season, and sales were down more than 30 percent. That, on top of what was already a tough year for Penney's. Every couple of months, the company has had to release bad news. Zoe Chace, from our Planet Money team, says actually, J.C. Penney was trying to do all the right things. It just hasn't worked out so well.

ZOE CHACE, BYLINE: J.C. Penney saw the threat every big retailer has been seeing for years - Amazon, online shopping. And a year ago, they acted; hired a fresh, new CEO, Ron Johnson, who'd already done what was getting to be impossible - gotten people to flock to actual buildings to shop. He did the Apple Store. He revamped Target. And he had a strategy for J.C. Penney. And some pricing strategists, like Rafi Mohammed, they were intrigued.

RAFI MOHAMMED: His pitch to customers was like, look, we're going to lower prices across the board. You don't have to wait for our crazy sales. You can come in at any time, and you'll get a good price. I'm not saying it's going to be the lowest price, but it's a good price and - that's fair to you and us.

CHACE: In other words, you don't have to spend your time clipping coupons, watching the calendar for when the sales happen. You will always get a good deal here, every day of the week.

MOHAMMED: He sort of said that sales were akin to drugs, and he was trying to wean customers off of drugs.

CAROL VICKERY: When it first happened, I was traumatized; and I'd come home and I'd cry over it. My husband was like, what's wrong? I said, Penney's don't have no sales no more. I need my store back.

CHACE: Carol Vickery had a ritual of shopping at her J.C. Penney in Tallahassee, Florida, a ritual that included something that Ron Johnson had just taken away, bargain hunting. And there were a lot of Carol Vickerys.

VICKERY: On Saturdays, we would go in at 9 and shop until 1. And then you'd get coupons; you got 50 percent off $10. And the store would be so packed. You would always be bumping into people, getting through your stuff. It was crazy. It was great, though.

CHACE: I went to check out what's different in J.C. Penney today, at the mall on Staten Island - with a guide.

HILENE ABIOLA: I grew up in Staten Island and, you know, the Staten Island Mall - it was like, the hangout spot.

CHACE: Hilene Abiola, 28 years old, fashion blogger. She grew up going to J.C. Penney - but not so much, as an adult. And she's exactly the kind of person J.C. Penney wants. In fact, they've redesigned the stores to appeal less to the coupon clippers and more to slim, young fashion bloggers.

So right off the bat, does anything look different?

ABIOLA: It definitely feels a bit more airy, spacious. They're trying to do more with the visuals, like what we're walking past right now. Obviously, that wouldn't have been there before.

CHACE: It's a bright, skinny mannequin. It's stylish. The idea is, make J.C. Penney a destination; someplace that a younger, hipper crowd will actually want to go - like, say, the Apple Store. There are these boutiques, these special sections of the store dedicated to just one designer.

ABIOLA: OK, this is the Liz Claiborne boutique. They have like, an interesting light, and it's like, very - like, modern. They have these couches here that you would never have found before. It's kind of like a lounge-y feeling.

CHACE: Yeah.

ABIOLA: And since when would J.C. Penney have a lounge in the middle of the shop, at the stores?

CHACE: Do you like it, though?

ABIOLA: It's definitely a lot nicer.

VICKERY: Have you ever been to a store, when you walk in you go, oh, God, they're probably gonna check my credit rating.

CHACE: Carol Vickery, in Tallahassee. She does not like boutiques.

VICKERY: The boutique stores now inside of Penney's - they put some clothes in now. That's like, what, what? I mean, it's not normal shopping for normal people.

CHACE: And here is J.C. Penney's sales problem in a nutshell. Their old customers, like Carol, feel unwelcome. But the people like Hilene, who they hope become their new customers, are so far just lukewarm. They kicked the old customers out before making sure new customers would arrive. Lately, things have gotten so bad, they're backing off the bold strategy of a year ago, a bit; reintroduced sales, coupons - though they're calling them gifts right now.

But the new J.C. Penney is still very different from the old. Back in New York, I saw them lose two more customers.

MARGARET RUSSO: There's nothing here. There's nothing here.

CHACE: Margaret Russo and her daughter Teresa.

TERESA RUSSO: They did away with the catalogs, and she used to shop through the catalog.

MARGARET RUSSO: Well, that's the thing. A million times, I did it.

TERESA RUSSO: They said everybody goes on the computers, but she doesn't know how to operate a computer so we take her to the store.

MARGARET RUSSO: Well, what are you going to do? I guess...

TERESA RUSSO: All good things come to an end, right?

MARGARET RUSSO: Yeah.

CHACE: It's hard to move into the future when the customers you have just don't want to go there. Zoe Chace, NPR News, New York. Transcript provided by NPR, Copyright NPR.